Sub Prime Loan Bust Hurts FICO

The sub prime loan bust has hurt the mortgage industry as a whole and has even gone beyond that and hurt the credit reporting agency Fair Isaac as well. Fair Isaac has been effected due to the high rise of foreclosed homes being seen across the nations along side sub prime loans and even prime loans that have been defaulted on. Even after the Federal Reserve has made four interest rate cuts to steer off recession, credit reporting companies such as Fair Isaac are taking extreme hits as well because the credit crisis that is happening now is happening to the customers in which keeps their business thriving.

The sub prime loan bust has taken its toll on many people across the United States and a lot of those people are pointing a finger at the FICO credit scoring model for part of the blame. FICO is a credit scoring model which has been used in the lending industry for quite some time in determining the credit worthiness of person and as it has been seen that people are unable to meet the financial demands of their mortgage products, many are blaming the Fair Isaac.

While many lending institutes are quick to place blame on the FICO credit scoring model for the rise in defaults, Fair Isaac has defended itself in saying that while the real estate boom was happening, lending institutions were warned that the FICO credit score tool must be used properly. FICO credit scores should not be used as the only tool in determining a person’s credit worthiness, but one of many tools.

Fair Isaac has taken a hit in revenue as decreases in open accounts have been seen from consumers. While many are quick to blame the FICO credit scoring model for the sub prime loan bust, those that pointing fingers are also turning a cheek to the fact that during the housing boom mortgage underwriters were anxious to get people into homes and neglected to do income verification or employment checks.

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